Producing a national car commercial with a winding road, aerial views and dashing driver might seem like a simple undertaking to those us watching from our couches. But such ads are costly and elaborate feats, involving potentially hundreds of people for production and postproduction tasks to edit and tweak the final spot.

These days, the process is made only more complex by the rapidly changing businesses behind their creation and production.

Ad agencies in the last couple of years have more aggressively pushed into producing such video ads, competing with the firms they once hired. Agencies have built out extensive production and postproduction capabilities in order to grow their revenues because clients are asking for more digital video content on shorter timelines while often cutting agency budgets and fees.

Now, the process of how commercials are produced and which companies are hired for the work is under intense scrutiny.

The probe has thrust into the limelight the fast-growing in-house agency production business, the murky bidding process by which marketers and agencies hire production firms, and the expansive list of players involved in the creation of a single commercial.

Hundreds of companies -- for directing, sound editing, special effects and color-correcting specialists -- contribute to the roughly $5 billion business in the U.S.

Once the idea for an ad is hatched by the creative agency, that agency is often the one charged with handling the bidding process for hiring both production and postproduction firms that will work to develop the commercial for the agency’s client. The bids can come from among hundreds of independent firms and also from the creative agency’s in-house production divisions or other production companies owned by the agency’s parent company.

In an effort to make sure the marketer is getting the best price for a particular job, many marketers require agencies to get three different companies to bid for that contract. These jobs range from hiring a production company to film and direct the video ad to locking in other companies for all of the postproduction editing tasks.

This bidding process is at the heart of the Justice Department’s antitrust investigation.

One postproduction executive called the system “inherently unfair.” This person said they were recently asked by an agency to bid on a job, and they were told by the agency what the job should cost. After the executive turned in a lower bid, the agency asked this person to resubmit their bid because it was lower than the price the agency had asked for.

These so-called “check bids” are often used to justify a decision that was already made to award the contract to an in-house group at a lower price. Such scenarios were described by several postproduction executives in undisclosed portions of an ad industry transparency report released this year, the research for which was conducted by corporate investigations firm K2 Intelligence.

In these cases, the production firms were urged to inflate the price they would otherwise quote on the bid. “This enabled the agency producer to create a paper trail that justified to the advertiser its decision to award the project to an in-house facility, which provided a rival bid at a lower price,” according to an early draft of the transparency report.

These accusations of price-fixing and bid-rigging could be impacting a huge range of independent companies and jobs that are already time-intensive and expensive.

Elaborate shoots can involve a production crew, including freelance staff, of over 100, not including tens to hundreds of actors and extras that the ad agency commissions through a talent agency, according to industry experts.

Altogether, production and post-production -- fine-tuning the footage -- for an elaborate automotive or brand campaign can cost anywhere from $1 million on up, plus the cost of commercial space or creative agency fees, said
Matt Miller,
president and CEO of the Association of Independent Commercial Producers.

After an agency comes up with the creative concept, the process to produce an elaborate, 30-second spot typically involves a review in which three production shops, which have their own exclusive relationships with directors, compete to win the project. The director of the winning production firm, who might be famous like Ridley Scott or lesser known and less expensive, will come up with a vision for a TV or video shoot—in Prague, from a helicopter, with a city backdrop, for example. The production shop then pulls together a massive crew of freelancers and independent specialist firms to coordinate all aspects of the shoot, from working with local officials to obtaining permits to shut down a street to casting, styling and wardrobe, catering, construction, lighting, equipment, hotel rooms and flights.

The footage is then typically delivered to the agency, which hires a company to edit the footage or handles the editing through its own in-house production group. Unlike film directors, commercial directors are rarely involved in the editing of the ad, said Mr. Miller.

The editor then sends the film to visual effects specialists and colorists to touch it up, as well as music specialists to contract musicians and record, license or edit the proper tunes.

While most of this work has typically been done by independent production shops, individual agencies and their parent companies have in recent years built out their own shops to handle these postproduction tasks, and, in some cases, the entire shoot.

Driving the in-house movement is clients asking agencies to deliver more pieces of “disposable content” for less money, said Mr. Miller. Agencies are looking to in-house production for more revenue and something else they can pitch to help retain business at a time when clients are awarding fewer long-term retainer accounts.

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